AGR Issue: In Chat with Anil Singhvi, EXPERTS DUB SC's verdict a BIG BLOW for telecom companies; raise concern about Vodafone Idea’s ongoing scenario

Terming it as negative for the telecommunication companies mainly for Vodafone Idea, the market experts and analysts see a huge impact on the share price of telecom companies, especially on Bharti Airtel and Vodafone Idea shares. The former declined by 1 per cent after verdict, and the latter tanked by 15 per cent erasing all its gains in the last five sessions and trading near a 52-week low today.

The Supreme Court bench headed by Justice LN Rao on Friday dismissed the pleas filed by the telecom companies seeking correction of ‘arithmetic errors’ in AGR (adjusted gross revenue) dues.

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In this regard, Ambareesh Baliga, a market analyst, says, the telecom has underperformed amid this AGR issue in the last 1-1.5 years, the shares of this company will lose everything gained so far in the last 2-3 sessions.

The last 2-3 sessions have certainly been positive for Bharti Airtel and Vodafone Idea, as the former inked pact with Intel for 5G solutions in the country and relaunched its new post-paid plans for both retail and corporate customers, while the latter has received approval from the government to raise between Rs 15000-18000 crore through Foreign Direct Investment (FDI) route.

#BreakingNews | टेलीकॉम कंपनियों को SC से बड़ा झटका

- AGR मामले में सुप्रीम कोर्ट ने टेलीकॉम कंपनियों की याचिका खारिज की#AGR #SupremeCourt #VodafoneIdea #Airtel pic.twitter.com/x1RI33hWVv

— Zee Business (@ZeeBusiness) July 23, 2021

Baliga is quite positive on the telecom sector with a long-term view, and expects Rs 14 per share levels target for Vodafone Idea is still possible, wherein the current dip should be seen as buying opportunity.

Meanwhile, HDFC Securities’ V K Sharma says, if the court verdict would have been in telecoms favour than both the companies (Airtel, Vodafone Idea) would have got some breather. 

Sharma suggests, Investors should put in their money in the stocks where there is better clarity, as with this verdict the clarity on Vodafone Idea becomes vague, He adds, the overall telecom sector is of course lucrative, and in this Reliance Industries (Jio) could be a better pick.

AGR मामले में सुप्रीम कोर्ट के फैसले पर मार्केट एक्सपर्ट अजय बग्गा की राय#AGR #SupremeCourt #VodafoneIdea #Airtel @Ajay_Bagga pic.twitter.com/faPpRWMUHX

— Zee Business (@ZeeBusiness) July 23, 2021

Adding further, Sharma says, this verdict would further create a dent on Vodafone Idea’s business, until they clear their AGR demands to the government, moreover their services are decreasing too.

Another analyst and market expert Ajay Bagga says, the apex court will always give a verdict in the favour of revenue and what is beneficial for the country. Last year in October, SC had given finality on AGR issue, however, the telecom companies still challenged it again.

As per telecom companies’ calculation, the dues are one-third of the total demand of the department of telecommunication, and now with this verdict, the telcos have to pay Rs 92000 crore in 10 years.

Supreme Court last year had given 10 years’ time to pay the AGR dues, even the government had given some cushion by postponing the deadline of dues, says Bagga, adding further, businesses such as of telecom and aviation can never work on debt, and this is an exact situation on Vodafone Idea.

SC dismissal of pleas is not only negative for telecoms but also for banks, as Vodafone Idea has Rs 1.8 lakh crore debt owed from various banks.